oihfedfhorigiojisdeffandomcom-20200214-history
Rngorgrng
In reality, Yahoo needed to move fast. And Mayer, who had begun her tenure while six months pregnant, tried to lead by example; she often slept only four hours a night and thrived on the breakneck pace. In her first months on the job, she unveiled a new version of Flickr, Yahoo’s photo-sharing social network, and a new Yahoo home page. Then Mayer overhauled the same products again, even as the company released new apps like Yahoo Weather and Yahoo News Digest. She outbid Facebook by a couple hundred million dollars to buy Tumblr. In the three quarters before Mayer’s arrival, Yahoo’s home-page team tested five new looks. In Mayer’s first two months, she prototyped 37. Continue reading the main story Mayer also announced that she wanted to repair Yahoo’s search engine, her specialty at Google. “I don’t see a reason why our search share should fall below 15 percent, which is where it roughly is today,” she told employees at an F.Y.I. “I also don’t see a reason why it can’t climb back up to the 20 percent that we had.” According to one executive, she told a group of six vice presidents that she wanted a redesigned search product unveiled by the end of the year. “Tell me if you can do it,” she instructed the group. “Otherwise, I’ll find people who can.” Largely owing to Mayer’s age and Google pedigree, her hiring had initially brought her overwhelmingly positive press during her first months at Yahoo. An article by Dan Frommer, an influential beat reporter for the industry news site ReadWrite, summed up a popular view: “This is a great move for Yahoo, which has stewed in mediocrity for years.” And by the beginning of 2013, just six months into the job, Mayer’s turnaround seemed to be ahead of schedule. In March, Yahoo’s stock rose to $22 per share, and Mayer added a tool to the company’s internal network that allowed employees to view their stock compensation. PhotoCreditIllustration by Matt Dorfman At a board meeting in April, Mayer admitted that she had not yet identified a “breakthrough product,” but she reminded those in attendance that Steve Jobs didn’t come up with the iPod until five years into his second tenure at Apple. At an F.Y.I. around that time, she read a speech that Jobs gave to Apple employees at the beginning of his turnaround. Afterward, channeling Jobs, Mayer told hundreds of employees sitting at URL’s, “Our purpose is to inspire and delight our users, to build beautiful services, things that people love to use and enjoy using every day, and that’s our opportunity.” She continued: “We are the world’s largest start-up. We have $5 billion in revenue, but it can and will go in the blink of an eye if we don’t do our jobs.” At Google, Mayer made her name as the executive who helped determine how products would look and work. She was less sure, however, about how to monetize them. At Yahoo, her most important hire was supposed to be someone who could figure all that out for her while also running Yahoo’s 1,000-plus-person sales force. Mayer did not have to search far. Within weeks of becoming C.E.O., she received an email from Henrique de Castro, the fashionable Portuguese president of Google’s media, mobile and platforms businesses. De Castro asked if she was available for a dinner and suggested a place. Mayer countered with a quieter venue and even arranged to get a table in the back. Over dinner, de Castro impressed Mayer with his knowledge of Yahoo’s business and his specific proposals for building it. For several mornings in a row, the two exchanged emails to negotiate de Castro’s salary. Every night, Mayer would make an offer, only to wake up to a reply with a list of more conditions. Eventually de Castro negotiated himself a contract worth around $60 million, depending on the value of Yahoo stock. The Yahoo board was aghast, but Mayer argued that de Castro had to be compensated for the unvested Google stock he was abandoning. Anyway, she said, his talent ensured that Yahoo would reap many multiples of his salary in return. Henrique de Castro would pay for himself. Continue reading the main story Mayer’s turnaround plan may have been predicated on building irresistible products to sell ads against. But hundreds of employees at Yahoo already worked on a side of the business that generated advertising revenues the more traditional way — by creating or licensing content, from beauty tips and Kardashian stories to daily videos on the financial markets and scripted comedies. For most of her first year at Yahoo, Mayer hardly paid any attention to this group, which generated $1.5 billion in annual revenue. This began to change in the spring of 2013, however, when Mayer attended the NewFronts, the annual event in New York where digital-content businesses display their coming programming for ad-agency buyers. Mayer kicked off the show by reading a corporate script from a prompter in an office-casual cardigan. Her talk felt woefully out-of-place at a splashy event whose other attendees included Ed Helms, the actor, and the Lumineers, the popular rock group. Still, the glamour of the event seemed to ignite Mayer’s interest in content, and within a month she asked that all programming decisions be run by her. While some at the company favored upgrading Yahoo’s content, there was a fear that Mayer, who preferred to read Town and Country and wear Oscar de la Renta couture, might undermine the company’s middle-American brand. To some, she also seemed to lack the instincts of a media executive. During a breakfast with Anna Wintour, the editor in chief of Vogue, Mayer asked if there might be any partnership opportunities between the magazine and Shine, Yahoo’s site for women. According to Mayer’s own telling of the story to top Yahoo executives, Wintour looked appalled. Shine, with its 500 million monthly page views, appealed to a mass audience, not a narrow and affluent one. Nevertheless, Mayer quickly became infatuated with the idea that Yahoo could attract more sophisticated consumers. She began pushing for deputies to commission high-quality shows, the way Netflix was doing with “House of Cards” and “Orange Is the New Black.” One Yahoo executive was forced to explain that only a company that sold subscriptions to consumers could expect to make money off such expensive productions. Reared in Google’s data-obsessed culture, Mayer tended to require countless tests about user preferences before making an important product decision. But when it came to media strategy, she seemed perfectly comfortable going with her gut. As a teenager in Wisconsin, she grew up sneaking into the living room to watch “Saturday Night Live” and occasionally recited sketches during meetings; in April 2013, Yahoo paid an estimated $10 million per year for the “S.N.L.” archives. Even though the actress Gwyneth Paltrow had created a best-selling cookbook and popular lifestyle blog, Mayer, who habitually asked deputies where they attended college, balked at hiring her as a contributing editor for Yahoo Food. According to one executive, Mayer disapproved of the fact that Paltrow did not graduate college. Continue reading the main story Over the summer, Mayer greenlighted a plan to hire Katie Couric, the former anchor of “CBS Evening News” and former co-host of the “Today” show. As was the case with de Castro, Couric put the idea in Mayer’s head herself after the two shared a stage at an advertising event in the Turks and Caicos. Couric, who was then hosting a failing daytime talk show on ABC, told Mayer she wanted to do something big for Yahoo. Couric had previously worked with the company to produce a video series, “Katie’s Take,” in which she interviewed experts on topics like health and parenting. Despite Couric’s star power, users didn’t click on her videos, no matter how prominently editors positioned them on the page. Mayer ignored those metrics, and in mid-2013, she named Couric Yahoo’s “global anchor” in a deal worth more than $5 million a year. Yahoo also lured a slate of expensive journalists to helm a series of new “digital magazines.” Mayer hired David Pogue, The New York Times’s gadget columnist, to be the editor of Yahoo Tech. She personally recruited Joe Zee, the creative director of Elle, telling him to consider Yahoo his “playground.” Mayer’s team asked the former Page Six editor Paula Froelich to run Yahoo Travel; the makeup star Bobbi Brown would oversee Yahoo Beauty. And Yahoo Shine, with its $45 million in yearly revenue, was shot down. For the NewFronts event in June 2014, Mayer wore a designer dress and introduced a slate of buzzy new shows that she personally approved. Behind the scenes, though, her hands-on strategy was backfiring. “I just think it is a strategic mistake to take on big media where they are strongest,” Jonah Peretti, the C.E.O. of Buzzfeed, wrote me in an email earlier this year, referring to her focus on stars, scripted shows and glossy content. “Especially when there is a huge open space at the intersection of media and tech where it is hard for other big companies to compete.” Couric, meanwhile, had done several interviews with high-profile figures, including former Secretary of Defense Robert Gates, but Yahoo’s users weren’t clicking on the videos. In May, Yahoo Tech had just nine million visitors, placing it in seventh place among competitors, far behind rivals like CNET and Gizmodo. Yahoo Tech would sometimes go weeks without running a single ad. Yahoo Food was 12th in its market. Yahoo’s display advertising revenues dipped 7 percent during the second quarter of 2014. One of the Yahoo board’s hesitations upon hiring Mayer was her relative lack of experience as a manager. While running search at Google, she oversaw 250 people. Mayer liked to spin her demotion by saying that it left her in charge of more than 1,000 staff members, but a majority of them were contractors. Either way, in her haste to turn around Yahoo, this relative inexperience began to surface. Some on the board had hoped that Ross Levinsohn would stay on as C.O.O., but any hope was jettisoned when Mayer asked him to fly from L.A. for a meeting and then stood him up. Mayer’s refusal to delegate became a sticking point, too. She insisted on personally approving every hire. One executive complained to a friend that Mayer spent as much time deliberating Yahoo’s parking policies as she did strategizing over the sale of its Alibaba stock. Continue reading the main story Mayer also had a habit of operating on her own time. Every Monday at 3 p.m. Pacific, she asked her direct reports to gather for a three-hour meeting. Mayer demanded all of her staff across the world join the call, so executives from New York, where it was 6 p.m., and Europe, where it was 11 p.m. or later, would dial in, too. Invariably, Mayer herself would be at least 45 minutes late; some calls were so delayed that Yahoo executives in Europe couldn’t hang up till after 3 a.m. In theory, Mayer kept up with her direct reports through weekly individual meetings. In practice, she often went weeks without seeing them. This delinquency eventually became a problem outside Yahoo. At a major advertising event in the South of France, Mayer sat for an interview with Martin Sorrell, the C.E.O. of WPP, one of the world’s largest agencies. In front of a filled auditorium, Sorrell asked Mayer why she did not return his emails. Sheryl Sandberg, he said, always got back to him. Later, Mayer was scheduled for dinner with executives from the ad agency IPG. The 8:30 p.m. meal was inconvenient for the firm’s C.E.O., Michael Roth, but he shuffled his calendar so he could accommodate it. Mayer didn’t show up until 10. At F.Y.I.s, Mayer liked to tell employees that she believed in taking risks and that she was unafraid to admit failure. This philosophy worked well for web products but not for strategic hires. Despite the board’s urging, Mayer opted against vetting Henrique de Castro. As a result, she was unaware that de Castro had a poor reputation among his colleagues in Google’s advertising business. Many had derisively called him the Most Interesting Man in the World, in reference to the satirically fatuous spokesman for Dos Equis beer. De Castro had a tendency to make grand, awkwardly worded pronouncements. He was the inspiration for the Twitter handle @HdCYouKnowMe, which posted tweets that straddled the line between reality and parody: “To incentivize the sales force, you need to hit them with the carrot” and “Product is like snakes . . . slippery — we need someone with a big hammer.” De Castro’s new Yahoo colleagues got a full dose of his strange locution at the company’s annual sales meeting, in early 2013, when he berated his sales force with a rangy, pedantic speech. (De Castro did not respond to requests for comment.) De Castro’s plan for growing Yahoo revenues focused on user-generated content, like the videos available on YouTube or Instagram. The only problem was that Yahoo did not have access to enough user-generated content to support this plan. (Its attempt to acquire Daily Motion, a YouTube clone, had fallen apart.) As Yahoo’s ad revenues continued to decline, de Castro began to alienate his staff and fellow executives. After one of his direct reports gave a presentation about Yahoo’s business in front of some 40 senior executives, de Castro humiliated the person, saying: “I think your strategy’s more of a fantasy. You make it up. You just make it up.” More important, advertising revenue declined in every quarter since he was hired. Within a year, Mayer had personally taken control of Yahoo’s ad team. De Castro would leave the company in January 2014. For about 15 months of work, he would be paid $109 million. Continue reading the main story Mayer’s largest management problem, however, related to the start-up culture she had tried to instill. Early on, she banned working from home. This policy affected only 164 employees, but it was initiated months after she constructed an elaborate nursery in her office suite so that her son, Macallister, and his nanny could accompany her to work each day. Mayer also favored a system of quarterly performance reviews, or Q.P.R.s, that required every Yahoo employee, on every team, be ranked from 1 to 5. The system was meant to encourage hard work and weed out underperformers, but it soon produced the exact opposite. Because only so many 4s and 5s could be allotted, talented people no longer wanted to work together; strategic goals were sacrificed, as employees did not want to change projects and leave themselves open to a lower score. One of the uglier parts of the process was a series of quarterly “calibration meetings,” in which managers would gather with their bosses and review all the employees under their supervision. In practice, the managers would use these meetings to conjure reasons that certain staff members should get negative reviews. Sometimes the reason would be political or superficial. Mayer herself attended calibration meetings where these kinds of arbitrary judgments occurred. The senior executives who reported to Mayer would join her in a meeting at Phish Food and hold up spreadsheets of names and ratings. During the revamping of Yahoo Mail, for instance, Kathy Savitt, the C.M.O., noted that Vivek Sharma was bothering her. “He just annoys me,” she said during the meeting. “I don’t want to be around him.” Sharma’s rating was reduced. Shortly after Yahoo Mail went live, he departed for Disney. (Savitt disputes this account.) As concerns with Q.P.R.s escalated, employees asked if an entire F.Y.I. could be devoted to anonymous questions on the topic. One November afternoon, Mayer took the stage at URL’s as hundreds of Yahoo employees packed the cafeteria. Mayer explained that she had sifted through the various questions on the internal network, but she wanted to begin instead with something else. Mayer composed herself and began reading from a book, “Bobbie Had a Nickel,” about a little boy who gets a nickel and considers all the ways he can spend it. “Bobbie had a nickel all his very own,” Mayer read. “Should he buy some candy or an ice cream cone?” Mayer paused to show everyone the illustrations of a little boy in red hair and blue shorts choosing between ice cream and candy. “Should he buy a bubble pipe?” she continued. “Or a boat of wood?” At the end of the book, Bobby decides to spend his nickel on a carousel ride. Mayer would later explain that the book symbolized how much she valued her roving experiences thus far at Yahoo. But few in the room seemed to understand the connection. By the time she closed the book, URL’s had gone completely silent. Mayer’s plan to restore Yahoo to the ranks of the tech giants had been premised on producing apps that hundreds of millions of people wanted to use. But as the Alibaba I.P.O. approached this fall, Yahoo’s new and updated apps weren’t getting enough traction. The digital-magazine strategy had not taken off, either; few of the strategic acquisitions seemed poised to break out; and Yahoo’s search business, which Mayer hoped to grow to a 20 percent market share, had dropped to around 10 percent. Mayer’s plan to sell a new kind of advertising in apps had been undermined by her trouble building relationships with clients, like Sorrell and Roth. Despite her efforts, Yahoo was still not growing. On July 15, the company reported dismal second-quarter revenues. Weeks later, Alibaba went public, and Jeff Smith pounced. Continue reading the main storyContinue reading the main story Since Starboard began its campaign to force an AOL merger, Mayer has been meeting with shareholders to reassure them about her strategy. Many public-company C.E.O.s become belligerent when activist investors come charging, but Mayer appears to be open to a compromise. Most Yahoo observers expect that, in the coming weeks, she will announce a plan to transfer almost all of the company’s Alibaba gains to shareholders while simultaneously resisting any merger with AOL. Mayer often compares her situation with the one Jobs inherited, and many expect her to insist that she needs at least the five years he received before his turnaround began to succeed with the release of the iPod. But Mayer may not be able to buy herself the time. Major Yahoo shareholders have recently begun collaborating on a series of spreadsheets that calculate that AOL and Yahoo are worth between 70 and 80 percent more when combined than they are apart. Some investors are further attracted to the merger because it will bring AOL’s chief executive, Tim Armstrong, into Yahoo. Like Mayer, Armstrong made his career as an early Google employee — but he was in charge of its sales force. After a rough start, Armstrong has managed to get AOL’s stock going again, not by inventing some new consumer product but by optimizing its ad and media assets. Armstrong, who has seen a version of this analysis, appears willing to consider a deal. Doing so, of course, would provide enormous personal benefit; Armstrong, who owns 5 percent of AOL, could stand to gain tens if not hundreds of millions of dollars. For Mayer, the calculus is less enticing. It’s unlikely that her personal turnaround plan included shrinking a $30 billion company into a $5 billion one, all to combine it with a $3 billion company and realize $1 billion in cost-savings. But it’s also unclear what, if any, other options she has. Turning Yahoo into a growing products company and appeasing its activist shareholders are now almost mutually exclusive tasks. If Yahoo were to sell off its stake in Alibaba, it would become an entirely different sort of entity. Its market capitalization could drop to $5 billion from $50 billion. Efficiencies that once seemed small would become, in the language of investors, “material.” Starboard might pressure Mayer to sell Yahoo’s real estate or to lay off 10,000 employees. Acquisitions would get harder, as smaller bets would become much bigger relative to Yahoo’s market capitalization. Aswath Damodaran, a professor at N.Y.U.'s Stern School of Business, has long argued about the danger of companies that try to return to the growth stage of their life cycle. These technology companies, he said, are run by people afflicted with something he calls the Steve Jobs syndrome. “We have created an incentive structure where C.E.O.s want to be stars,” Damodaran explained. “To be a star, you’ve got to be the next Steve Jobs — somebody who has actually grown a company to be a massive, large-market cap company.” But, he went on, “it’s extremely dangerous at companies when you focus on the exception rather than the rule.” He pointed out that “for every Apple, there are a hundred companies that tried to do what Apple did and fell flat on their faces.” In many ways, Yahoo’s decline from a $128 billion company to one worth virtually nothing is entirely natural. Yahoo grew into a colossus by solving a problem that no longer exists. And while Yahoo’s products have undeniably improved, and its culture has become more innovative, it’s unlikely that Mayer can reverse an inevitability unless she creates the next iPod. All breakthrough companies, after all, will eventually plateau and then decline. U.S. Steel was the first billion-dollar company in 1901, but it was worth about the same in 1991. Kodak, which once employed nearly 80,000 people, now has a market value below $1 billion. Packard and Hudson ruled the roads for more than 40 years before disappearing. These companies matured and receded over the course of generations, in some cases even a century. Yahoo went through the process in 20 years. In the technology industry, things move fast. “Sometimes,” Damodaran told me, “companies have to act their age.” For Yahoo, embracing its maturity means settling for a business that earns close to $1 billion in profit every year. It has outlasted other formerly iconic Internet portals, from AltaVista to Excite, and even dwarfs more recent web sensations like Myspace and Ask.com. For a company that started out as “Jerry and David’s Guide to the World Wide Web,” that’s not a bad way to grow old.